Which of the Following Are Correct Arguments Supporting Passive Investment

question 24

Multiple Choice

Which of the following are correct arguments supporting passive investment strategies?
I.Active trading strategies may not guarantee higher returns but guarantee higher costs
II.Passive investors can free ride on the activity of knowledge investors whose trades force prices to reflect currently available information
III.Passive investors are guaranteed to earn higher rates of return than active investors over sufficiently long time horizons

• A) I only
• B) I and II only
• C) II and III only
• D) I, II and III

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Definitions:

Manufacturing Overhead

Indirect production costs that cannot be directly attributed to specific units produced, such as utilities and rent for the production facility.

Cost of Goods Sold

The direct costs attributable to the production of goods sold by a company, including materials, labor, and overhead costs.

Direct Materials

Raw materials that are directly traceable to the production of specific goods or services.

Raw Materials

Basic materials that are used in the manufacturing process to produce goods or finished products.